𝐔𝐧𝐬𝐞𝐞𝐧 𝐥𝐚𝐰𝐦𝐚𝐤𝐞𝐫𝐬 𝐨𝐟 𝐈𝐧𝐝𝐢𝐚’𝐬 𝐦𝐚𝐫𝐤𝐞𝐭𝐬
Dr. M. S. Sahoo and Mr. Sumit Agrawal, writing in Business Standard, have highlighted an important but often overlooked aspect of India’s securities market architecture i.e., the norm-making powers exercised by Market Infrastructure Institutions (MIIs) and the need for greater democratic and legislative oversight over such powers.
The article examines the proposed Securities Markets Code, 2025, which recognises MIIs as institutions performing public and regulatory functions. Stock exchanges, clearing corporations and depositories do far more than provide infrastructure; through their rules, byelaws, regulations and circulars, they shape market behaviour, determine access to markets, prescribe compliance obligations and impose disciplinary consequences.
The authors note that while Securities and Exchange Board of India (SEBI)’s regulations and subsidiary instructions are subject to established procedural safeguards and parliamentary scrutiny, a significant portion of MII rulebooks continues to operate outside comparable oversight. This creates an asymmetry despite the fact that MII instruments often have far-reaching consequences for investors, intermediaries, issuers and other market participants.
The article discusses:
(a) The increasing recognition of MIIs as public regulatory institutions rather than mere private entities.
(b) The legal and constitutional significance of MII rulebooks, including their impact on business rights and market access. (c) The Supreme Court’s recognition of the binding nature of exchange rulebooks and disciplinary actions.
(d) The possibility of regulatory arbitrage if legislative scrutiny applies only to MII byelaws while rules, regulations and circulars remain outside equivalent oversight.
(e) The need to harmonise the procedural safeguards applicable to SEBI’s regulatory instruments and equivalent MII norm-making mechanisms.
The authors argue that while MIIs require operational flexibility to respond to market developments, such flexibility must be balanced with transparency, accountability and democratic legitimacy. As India’s securities markets continue to evolve, the governance framework applicable to institutions exercising regulatory power may require closer examination.
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